Problem
E-Sonic is a fictional online music company that is just starting out. As a consultant for E-Sonic, you have been asked to calculate 401(k) contributions under different types of matching contributions for Employee A and Employee B. Employee A has an annual salary is $75,000 and is age 55. They've decided to contribute 10 percent of their annual salary to their 401(k) plan.
Employee B has an annual salary is $155,000 and is age 40. They've decided to contribute 6 percent of their annual salary to their 401(k) plan.
• If E-Sonic had a full match contribution approach, what would be the company's contribution and what would be the total contribution to the 401(k) for account for (a) Employee A and (b) Employee B?
• If E-Sonic had a fixed dollar match contribution approach that was $1 per $1 employee contribution up to 3% of pay, what would be the company's contribution and what would be the total contribution to the 401(k) for account for (a) Employee A and (b) Employee B?
• If E-Sonic had a variable dollar match approach that was $1 per each $1 employee contribution on the first 3% of pay and 75 cents per $1 employee contribution for the next 3% of pay, what would be the company's contribution and what would be the total contribution to the 401(k) for account for (a) Employee A and (b) Employee B?